Americans Clearly Aren’t Buying into Democrats’ Empty Economic Promises

It looks like the Democrats have taken another shellacking in the congressional elections this week. Part of this is due to factors like the normal falloff in voting in a non-presidential year and the weariness with a president after six years in office, which tends to cause the electorate to support the opposing party.

However, part of the reason for the shellacking is the Democrats’ refusal to address the economic issues that trouble most of the public. As folks know who are either familiar with the data or live in the real world, the economy is still bad for most people. President Obama can rightly say that he inherited a mess from his predecessor, but at some point that does get old. He can also honestly blame the Republicans in Congress who have eagerly proclaimed their opposition to any economic proposal that doesn’t have the primary purpose of making the rich even richer.

While the grim reality can offer legitimate excuses, the Democrats still suffered from the fact that they didn’t have a real economic agenda for the bulk of the population. The Republicans at least have a clear agenda. Everyone knows if they get back in control they will give everything left on the table to the richest 1 percent. But what would the Democrats do?

We do know they would raise the minimum wage. This is good policy to get more money in the pockets of low income workers who can badly use a raise. It is also popular. Polls regularly show that large majorities of people across the political spectrum support increasing the minimum wage.

Still, a higher minimum wage doesn’t offer anything to the bulk of the labor force whose wages will not be affected by plausible increases in the minimum wage. To these people the Democrats offered nothing but empty rhetoric and the public wasn’t stupid enough to buy it.

There is no shortage of policies that the Democrats could be pushing which would help ordinary workers. To start with one that features prominently in the business press, the Democrats could take a strong position behind an expansionary monetary policy from the Federal Reserve Board.

This means strong opposition to rate increases until there is clear evidence of inflation.

The Fed is independent and has to make its own calls, but it would help them make the right calls if they know that there are many in Congress who are prepared to insist the Fed follow its mandate for maintaining high employment. The Fed faces intense pressure from the financial industry to pounce on any hint of inflation.

The financial industry wants the Fed to raise interest rates to keep unemployment high and prevent workers from gaining bargaining power. It would be a nice switch if Democrats stood could say in public that the Fed should allow workers to get jobs and to gain some bargaining power.

Another switch would be if the Democrats could talk seriously about the trade deficit. Talk of restoring ​“competitiveness” is cute, but basically complete nonsense. No one in either party has any proposal that will make more than a marginal difference in the productivity of the U.S. economy any time in the near future.

If we want to get the trade deficit down then we have to get the value of the dollar down against the currencies of our trading partners. And this is not a question of beating them up for ​“manipulating” their currency. It is a question of negotiating where we give up things like enforcement of Microsoft’s copyrights or Pfizer’s patent monopolies in exchange for a lower valued dollar, and therefore more balanced trade.

Democrats also should be able to speak simple truths about national income accounting instead of being afraid in the way that Republicans are scared to openly endorse the theory of evolution. If we have a large trade deficit, the only ways we can get to potential GDP is either through asset bubbles that pump up investment and consumption or through government deficits. Like evolution, this is true.

Unfortunately, the Democratic Party seems to be controlled by economics denialists. This has prevented it from having a coherent economic message.

Finally, a Democratic Party that hopes to have an appealing economic message for ordinary workers has to be prepared to attack Wall Street. This is not an abstraction. If the industry was forced to pay the same sort of taxes as other industries, as even the I.M.F. now advocates, and we broke up the big banks, it would go far towards ending the financial sector’s drain on the rest of the economy. It would also go far toward reducing inequality.

In short, it is not surprising that voters were not happy with the Democrats. They did not have a program that offers real improvement in the average person’s life. And the message that the other guy is worse apparently did not cut it this year.